U.S. companies are expected to seek alternative sources for key industrial metals in response to sweeping tariffs imposed by President Donald Trump, industry sources report. To mitigate the impact of these trade restrictions, businesses are looking to the Middle East and India for aluminium supplies, while turning to Chile and Peru for copper.
Trump’s orders for additional levies of 25% on imports from Mexico, most goods from Canada, and 10% on goods from China have been light on detail. But they are scheduled to kick in on Tuesday and have disrupted markets.
According to Analysts, U.S. consumers rely on Canadian aluminum producers like Alcoa and Rio Tinto for over half of their imported supply but are now seeking alternative sources.
The United States imported 5.46 million metric tons of aluminium products in 2023, for various Industries U.S. Commerce Department data shows.
Canada accounted for 3.08 million tons, or 56% of that, the data showed.
“Canada will divert some aluminium from (going to) the U.S. to other regions, so for the U.S. to encourage aluminium from other regions, they are going to have to pay a bit more,” said analyst Glyn Lawcock from Sydney investment bank Barrenjoey.
The impact of tariffs is likely to be reflected in physical premiums, which cover additional costs such as handling and shipping and are paid on top of exchange prices for the delivery of physical metal.
Analysts at ING have identified this as a key factor influencing market trends, stating in a recent note that the tariffs pose a “significant upside risk to the U.S. Midwest premium this year.”
Prices of primary aluminium in the U.S. are based on the London Metal Exchange benchmark plus the Midwest premium, which jumped to 2.95 U.S. cents a lb or $650 a metric ton on Friday. That reflects a gain of more than 10% since the start of the year and is the highest since July 2022.
Alcoa’s William Oplinger said on an earnings call last month that Alcoa could reroute its Canadian material to Europe, and he expected more Middle Eastern metal and potentially Indian metal to come into the U.S. market.
The United Arab Emirates and Bahrain are both major aluminium producers. Sources at two aluminium producers said they were waiting and monitoring Trump’s announcements. However, they observed a “no intention to change yet”.
According to reports, a lawyer advised clients to exercise caution in case the tariffs are withdrawn and to explore alternative markets outside the U.S. as a precaution against potential tariff expansions by Trump.
Citi analysts noted that shifting trade flows across various metals could help lessen the impact of tariffs, with the U.S. increasing imports from key alternative sources such as Peru and Chile for copper and silver, and Switzerland for gold. Combined, Canada and Mexico represent around half of U.S. domestic silver consumption and around 10% of U.S. copper consumption, equivalent to some 147,000 metric tons of copper.
“This announcement also raises the likelihood of further tariff measures… while lowering expectations for exemptions for U.S. free-trade partners,” the Citi analysts said, pointing out the potential for a universal U.S. import tariff on specific metals.